Court File and Parties

COURT FILE NO.: CV-17-586394 DATE: 20190312

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

PARADISE HOMES NORTH WEST INC. Plaintiff/Moving Party – and – INDERVIR SINGH SIDHU Defendant/Responding Party

Counsel: Samantha M. Green, for the Plaintiff/Moving Party Ajay Duggal, for the Defendant/Responding Party

HEARD: December 11, 2018

Reasons for Decision

C. J. BROWN, J.

[1] Paradise Homes North West Inc. (“Paradise Homes” or the plaintiff) moves for summary judgment as against the defendant, Indervir Singh Sidhu (“Mr. Sidhu” or the defendant) as regards Mr. Sidhu’s default on the Agreement of Purchase and Sale (“APS”) concluded between them.

[2] Pursuant to the APS dated March 4, 2017, Mr. Sidhu agreed to purchase 10 Truro Circle in Brampton, Ontario for $819,990, which had been built by the plaintiff. The closing was to be November 29, 2017. The APS required Mr. Sidhu to pay five deposits, the last due September 4, 2017. Mr. Sidhu paid four deposits totaling $45,000, but defaulted on the fifth deposit. He asked for an extension, which was granted to September 20. He delivered a cheque which was returned NSF. Notice of default pursuant to section 12.3 of the APS was delivered on October 3, 2017, allowing Mr. Sidhu 10 days in which to cure his default.

[3] On September 25, 2017, prior to the delivery of the notice of default, Mr. Sidhu requested that Paradise Homes assign the APS to his cousins. While there was a “no assignment” clause in the APS, Paradise Homes indicated that they would permit an assignment upon payment by Mr. Sidhu of a $25,000 assignment fee and $1000 in legal fees to cover the assignment. Mr. Sidhu refused to pay the requisite fees, insisted that he was entitled to assign title to a third party, defaulted on the fifth deposit, and ultimately failed to close the transaction.

[4] Mr. Sidhu failed to close on the scheduled closing date. On November 1, 2017, Paradise Homes delivered a letter to Mr. Sidhu confirming that, due to his default, the APS was terminated and the deposits were forfeited.

[5] Mr. Sidhu has admitted that he defaulted on the APS as follows: (i) he delivered a fifth deposit by cheque that was returned NSF, (ii) he failed to replace the fifth deposit, and (iii) he failed to close the transaction. In his defence, he alleges frustration of the contract by market conditions or by the fee charged by Paradise Homes to grant an assignment. He further denies that Paradise Homes mitigated its damages reasonably.

[6] Mr. Sidhu, in his cross-examination on his affidavit filed in support of this motion, testifies that, at the time of the transaction, he was 26 years old and had never purchased property previously. He had graduated in 2013 with a college diploma in business and was working as a taxi driver. He testified that things were not working out for him and, as of the first week of October 2017, he moved to British Columbia, where he continues to reside. The only step he took to obtain financing in order to close the sale was to consult one mortgage broker who advised him that, as markets were low, he could only obtain a mortgage of $700,000. He needed a mortgage of $800,000 in order to close.

[7] Following the default, Paradise Homes listed the property for sale in the spring market, on March 19, 2018. They did so due to their experience with winter sales, and to ensure the most value for the home, as a sale in the spring rather than in November would most likely deliver a better price. The property was listed for $729,000, which was higher than the appraised value of $700,000. It was shown 34 times over a two week period, with only one offer received, which was accepted by Paradise Homes. It was sold for $715,000, the sale closing on June 28, 2018.

[8] As a result of the defendant’s defaults, Paradise Homes incurred losses from the aborted sale equal to the difference between the original and the ultimate sale prices, plus the carrying and sale costs as follows:

1. Difference between the original and ultimate sale prices: $93,061.51
2. Real Estate Commission: $28,600.00
3. Staging Costs: $2,900.00
4. Cleaning Costs: $700.00
5. Gas for the period April 2018 to June 2018: $447.19
6. Hydro for the period April 2018 to June 2018: $285.18
7. Realty taxes: $815.62
8. Appraisal Report: $250.00
9. Total deficiency: $127,059.50

[9] After deduction of Mr. Sidhu‘s deposit of $45,000, the plaintiff’s damages total $82,059.50.

[10] The plaintiff seeks that amount from the defendant in this summary judgment motion. It is the position of the plaintiff that there is no dispute that the parties entered into an unconditional APS and that the defendant defaulted by failing to pay the required fifth deposit and failing to complete the transaction on the closing date. It is the position of the plaintiff that the defendant’s only defences of frustration by market conditions and Paradise Homes’ position on assigning the APS are not tenable.

[11] It is the position of the defendant that it was impossible to perform the contract due to market-driven conditions which were force majeure. The defendant submits that the real estate market drop which resulted in a slump in sales was neither foreseeable nor expected and was beyond the control of the defendant. The defendant submits that the contract was frustrated by his impossibility to perform the contract and cites Folia v. Trelinski (1997), 14 R.P.R. (3d) 5 (B.C.S.C.). In addition, the defendant argues that the contract was frustrated by the fee charged by Paradise Homes to grant an assignment. Finally, it is the position of the defendant that the damages claimed by the plaintiff are unreasonable and excessive.

The Law

Summary Judgment

[12] Pursuant to r. 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, summary judgment shall be granted where there is no genuine issue requiring a trial.

[13] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court of Canada determined that there would be no genuine issue requiring a trial where a judge is able to reach a “fair and just determination on the merits” of the case. This will be the case where the process: (1) permits the judge to make the necessary findings of fact on the basis of the evidence adduced, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[14] Pursuant to Hryniak, the motion judge should first determine if there is a genuine issue requiring a trial based only on the evidence before the Court, without using the new fact-finding powers set forth in r. 20.04. There will be no genuine issue requiring a trial if the summary judgment process provides the Court with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportional procedure. If there appears to be a genuine issue requiring a trial, the motion judge should determine if a trial can be avoided by using the new powers under rr. 20.04(2.1) and (2.2). The judge may, at his or her discretion, use those powers, provided that doing so does not offend the interest of justice, i.e., that it will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.

[15] In this regard, I am cognizant of and have taken into consideration the findings of Karakatsanis J. addressing the “interest of justice” requirement in Hryniak v. Maulden, supra, at para. 60, as follows:

The “interest of justice” inquiry goes further and also considers the consequences of the motion in the context of the litigation as a whole. For example, if some of the claims against some of the parties will proceed to trial in any event, it may not be in the interest of justice to use the new fact-finding powers to grant summary judgment against a single defendant. Such partial summary judgment may run the risk of duplicative proceedings or inconsistent findings of fact and therefore the use of the powers may not be in the interest of justice. On the other hand, the resolution of an important claim against a party could significantly advance access to justice and be the most proportionate, timely and cost-effective approach.

[16] The moving party bears the onus of establishing that there is no triable issue. However, a responding party must “lead trump or risk losing”: 1061590 Ontario Limited v. Ontario Jockey Club (1995), 21 O.R. (3d) 547 (C.A.); and Da Silva v. Gomes, 2018 ONCA 610. The responding party may not rest on the allegations or denials in the pleadings, but must present by way of affidavit or other evidence, specific facts and coherent, organized evidence demonstrating a genuine issue. The motions judge is entitled to assume that the record contains all evidence that the parties will present if there is a trial. It is not sufficient for the responding party to say that more and better evidence will be available at trial. The Court must take a “hard look” at the evidence to determine whether there is a genuine issue requiring a trial.

[17] The Court of Appeal has recently held in Butera v. Chown, Cairns LLP, 2017 ONCA 783, 137 O.R. (3d) 561 that a motion for partial summary judgment is a “rare procedure”:

A motion for partial summary judgment should be considered to be a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost effective manner. Such an approach is consistent with the objectives described by the Supreme Court in Hryniak and with the direction that the Rules be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

See also Espresso Tax Credit Fund III Limited Partnership v. Arc Stainless Inc., 2018 ONSC 415.

Frustration of Contract

[18] The law and the doctrine of frustration raised by a defaulting purchaser under an agreement of purchase and sale was recently summarized by this court in Bang v. Sebastian, 2018 ONSC 6226 as follows:

The doctrine of frustration operates to relieve parties of their bargain because a supervening event has occurred, without the fault of either party, which renders the performance of the contract substantially different than the parties had bargained for. This is seen in Naylor Group Inc. v Ellis-Don Construction Ltd., 2001 SCC 58, [2001] 2 S.C.R. 943, at para 53:

Frustration occurs when a situation has arisen for which the parties made no provision in the contract and performance of the contract becomes “a thing radically different from that which was undertaken by the contract”: Peter Kiewit Sons Co. of Canada v. Eakins Construction Ltd., [1960] S.C.R. 361, per Judson J., at p. 368, quoting Davis Contractors Ltd. v. Farehan Urban District Council, [1956] A.C. 696 (U.K.H.L.), at p. 729.

The Supreme Court canvassed earlier cases of frustration that assessed the contractual obligations on an “implied term” theory, namely: “if the contracting parties, as reasonable people, had contemplated the supervening event at the time of contracting, would they have agreed that it would put the contract to an end”: Naylor Group at para. 54.

Both approaches, however, share a common element: there can be no frustration if the supervening event was contemplated by the parties at the time of contracting and was provided for or, as in the present case, deliberately chosen not to be provided for in the contract: Capital Quality Homes Ltd. v. Colwyn Construction Ltd. (1976), 9 O.R. (2d) 617, at p. 626 (C.A.).

A party claiming that a contract has been frustrated has the onus of proving the constituent elements necessary to establish frustration: Gerstel v. Kelman, 2015 ONSC 978, 40 B.L.R. (5th) 314. I have determined that the purchaser defendant has failed to do so.

[19] In the case of Bang v. Sebastian, supra, the defaulting purchaser had claimed that the fall in the market and her inability to qualify for financing amounted to unforeseen and supervening events, i.e. frustration. This argument was rejected and Sanfilippo J. held that even had the purchaser adduced evidence of the fall in the market, it would not have been enough to establish frustration. He held as follows:

However, even if the purchaser defendant had established a fall in real estate values in Mississauga in the period from May to August 2017, this would still not have constituted an “unforeseen supervening event” of the nature required to invoke the doctrine of frustration in this case. Ms. Sebastian was the owner of real estate at the time that she offered to purchase the Glasshill Grove property. She had listed her property for sale in order to have sufficient capital on hand to purchase the Glasshill Grove property. She timed the sale of her property with the acquisition of a new property. She knew that property values could go up, and from this she knew that property values could go down. Ms. Sebastian deposed that the decrease in values was beyond her control and not what she expected would occur, but this does not make it “unforeseen”.

[20] Similarly, in this case, the fall in the market does not trigger the defence of frustration. The defendant did not provide any expert evidence as regards the fall in the markets.

[21] Further, even in the case of Folia v. Trelinski, supra, relied upon by the defendant, the defendant does not satisfy the five-part test set forth therein as regards frustration. The five-part test is as follows:

1. The event in question must have occurred after the formation of the contract and cannot be self-induced;
2. The contract must, as a result, be totally different from what the parties had intended;
3. The disruption must be permanent and not temporary or transient;
4. The change must totally affect the nature, meaning, purpose, effect, and consequences of the contract so far as concerns either or both parties; and
5. The act or event that brought about such radical change must not have been foreseeable.

[22] In this case, the defendant defaulted because he was not able to borrow the amount of money he required to close the deal. He only consulted one mortgage broker and no one else. While he states that he was unable to borrow the money because the market prices fell and that this was unforeseen and such a radical change that it completely changed the nature of the APS, I do not find that to be the case. The contract was not rendered totally different from what the parties had intended. The parties had intended that 10 Truro Circle would be sold by the plaintiff to the defendant for the agreed-upon amount of $819,990. The contract did not change and was not altered. The “change did not totally affect the nature, meaning, purpose, effect, and consequences of the contract”. The “disruption”, as used in the case of Folia v. Trelinski, supra, was not permanent. The event that brought the default was not unforeseen. Indeed, I find it difficult to accept that it was unforeseen by Mr. Sidhu, given that he had graduated with a post-secondary business diploma. The reason that he defaulted was that he was unable to borrow a sufficient amount to close the deal. This does not amount to frustration as set forth in Bang v. Sebastian, supra.

[23] The defendant further submits that having Paradise Homes demand fees for the assignment requested was unreasonable and amounted to frustration. The APS contained a “no assignment” clause at section 9.2.2 as follows:

The purchaser covenants and agrees:

a. … b. not to sell, advertise, list for sale, transfer or assign this agreement or make or attempt to make any other disposition of the dwelling or the agreement without the consent of the vendor, which consent may be arbitrarily withheld.

[24] Thus, the purchaser was not able to assign the agreement unless the vendor consented, which consent could be arbitrarily withheld. In this case, the vendor did agree to an assignment of the APS on the condition that the purchaser pay $25,000 as an assignment fee and $1,000 in legal fees to cover the assignment. While the vendor, pursuant to the APS, could have withheld consent arbitrarily, instead, it agreed to assignment upon payment of the above-mentioned fees, which I found to be reasonable, particularly for the sale of a property in the amount of $819,990. This clearly does not fit the definition of “frustration”.

[25] I do not accept the defences advanced by the defendant in this case.

Damages

[26] The plaintiff seeks the damages set forth at para. [9], above, in the total amount of $82,059.50. The general principle underlying the damages to which Paradise Homes is entitled is summarized as follows by Victor DiCastri, Q.C. in The Law of Vendor and Purchaser, 3rd ed. (Carswell: 1989) (loose-leaf revision), at para. 889:

The measure of damages is the difference between the contract price and the resale price together with any actual costs incurred as a result of the breach. Absent resale, the measure, basically, is the difference between the contract price and the market value at the date of the breach; normally, this is the completion date. Reasonable steps must have been taken to mitigate damages. The deposit must be taken into account. Additional amounts, such as a second real estate commission, have to be justified. To be recoverable, damages must be reasonably foreseeable.

[27] The most general principle relating to the assessment of the damages is that the plaintiff is entitled to be put in the position it would have been in if the contract had been performed so far as money can do it: DiCastri, The Law of Vendor and Purchaser, supra.

[28] In this case, based on all the evidence before the Court, I am satisfied that the damages, as set forth above, are reasonable, justified, and reasonably foreseeable. As regards Mr. Sidhu’s deposits, if an agreement of purchase and sale is not completed as a result of the default of the purchaser, the deposit, being a guarantee of performance, becomes the property of the vendor: CXL Universal Holdings Inc. v. Century 21 Harvest Realty Ltd., at paras. 26 and 28.

[29] It is the position of the defendant that the plaintiff failed to mitigate its damages by not assigning the APS to his relatives in September 2017.

[30] This Supreme Court of Canada in Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, [2012] 2 S.C.R. 675, summarized the principles underlying mitigation of damages as follows:

In British Columbia v. Canadian Forest Products Ltd., 2004 SCC 38, [2004] 2 S.C.R. 74, at para. 176, the Court explained that “[l]osses that could reasonably have been avoided are, in effect, caused by the plaintiff’s inaction, rather than the defendant’s wrong.” As a general rule, a plaintiff will not be able to recover for those losses which he could have avoided by taking reasonable steps. Where it is alleged that the plaintiff has failed to mitigate, the burden of proof is on the defendant, who needs to prove that the plaintiff has failed to make reasonable efforts to mitigate and that mitigation was possible (Red Deer College v. Michaels, [1976] 2 S.C.R. 324; Asamera; Evans v. Teamsters Local Union No. 31, 2008 SCC 20, [2008] 1 S.C.R. 661, at para. 30).

[31] On the other hand, a plaintiff who does take reasonable steps to mitigate loss may recover, as damages, the costs and expenses incurred in taking those reasonable steps, provided that the costs and expenses are reasonable and were truly incurred in mitigation of damages (see P. Bates, “Mitigation of Damages: a Matter of Commercial Common Sense” (1992) 13 Advocates’ Q. 273). The valuation of damages is therefore a balancing process as the Federal Court of Appeal stated in Redpath Industries Ltd. v. Cisco (The), [1994] 2 F.C. 279, leave to appeal to S.C.C. refused, 24006 (13 October 1994), at p. 302: “The court must make sure that the victim is compensated for his loss; but it must at the same time make sure that the wrongdoer is not abused.” Mitigation is a doctrine based on fairness and common sense, which seeks to do justice between the parties in the particular circumstances of the case.

[32] While the onus was on Mr. Sidhu to show that Paradise Homes failed to make reasonable efforts to mitigate and that mitigation was possible, he failed to put forward any evidence that Paradise Homes’ efforts in relisting the property in the spring, when prices would be better, were not reasonable. Nor did he provide any evidence that the commissions and costs incurred by Paradise Homes were not patently fair and reasonable. Further, Mr. Sidhu has put forward no evidence that his proposed assignees were capable of closing the transaction. They themselves submitted no offer to Paradise Homes. Moreover, Mr. Sidhu failed to offer any expert evidence that Paradise Homes could have sold the property for more than it did. I find, as regards the above, that Mr. Sidhu did not meet his onus to prove his mitigation defence.

[33] Based on all of the foregoing, I find that there is no genuine issue for trial. I grant Paradise Homes summary judgment.

Costs

[38] I would urge the parties to agree upon costs, failing which I would invite the parties to provide any costs submissions in writing, to be limited to three pages, including the costs outline. The submissions may be forwarded to my attention, through Judges’ Administration at 361 University Avenue, within 30 days of the release of this Endorsement.

C. J. Brown, J.

Released: March 12, 2019